How to price a barrel of water in the oil sands

We all know the value of a barrel of oil, but how do you put a price on a barrel of water?

It’s a growing and challenging debate in the oil sands, where oil, which sells at a readily available market price, and water, which is priceless but restricted, are so intertwined one cannot be produced without somehow shortchanging the other.

Indeed, oil sands projects are also giant water handling factories, with oil sands mines using on average of about 3.1 barrels of fresh water for every barrel of oil they produce, and in-situ operations using about 0.4 barrels of fresh water for every oil barrel they produce.

Much like the larger debate over the oil sands’ greenhouse emissions, views on the right oil and water mix are polarized: for some, any water used to produce oil comes at an unacceptable cost to an ecosystem that needs it; for others, water use is minor relative to its abundance and justified by the value it creates through oil.

Environmental organizations like the Pembina Institute, for one, are indignant over withdrawals of any amounts of water from rivers like the Athabasca that run through Alberta’s oil sands region, claim development contaminates water bodies nearby and that monitoring is inadequate.

The Canadian Association of Petroleum Producers, which represents Canada’s oil industry, says use of fresh water is minimal, or 0.6% of total Athabasca river flows, that a lot of the water used by the industry comes from saline underground pools, and that projects recycle more than 80% of the water they use.

The Alberta government, for its part, says it has monitored water quality in the oil sands region since the early 1970s, when the sector was in its infancy, and that the Athabasca has always had measurable levels of naturally occurring hydrocarbon compounds because bitumen from exposed oil sands along the riverbanks seeps naturally into the river.

The province sets limits on withdrawals that it says maintain flows at or near natural conditions. To protect the quality of the river, no production water can be returned and is instead stored in tailings ponds.

Still, with many more oil sands projects planned, and water-related incidents fuelling the backlash against development of the oil sands, the sector recognizes it needs to improve.

Water is one of the priority areas of Canada’s Oil Sands Innovation Alliance (COSIA), the consortium of 14 oil sands producers formed last year to accelerate environmental performance improvements. The other priority areas are reducing greenhouse gas emissions, reducing the impact on land, and cleaning up tailings ponds, which is treated as a separate water issue.

After spending the past year sharing technologies and innovations, the alliance is finalizing industry-wide targets that are expected to involve higher water recycling rates and reduced water intensity per barrel over a fixed period.

“We are getting ready to say: This is where we are at now and this is where we are going,” said John Brogly, director of COSIA’s water environmental priority area.

To aid in achieving those targets, the group is looking at a variety of projects, including new steaming technology that uses less water, increasing water treatment skills and piping excess water from mining projects to in-situ projects that need it to generate steam.

“The process water from the mine site is excellent water compared to some of the saline aquifers (used by in-situ operators), and there is a net environmental benefit for the mining site because … it’s a way to get rid of salt and excess water, and at the same time it’s very good feed water for in situ, so it’s a win-win,” Mr. Brogly said.

Many options are being looked at because every oil sands lease requires different water handling, he said.

“There isn’t a solution, there is a series of solution, and depending on your lease and some other factors, the low cost solution and best environmental solution is often different,” he said. “What Suncor (Energy Inc.) is doing at Firebag is different than what the technology solution is for their MacKay River lease.”

Mr. Brogly, a Canadian Natural Resources Ltd. employee seconded to COSIA, said 50 to 60 water experts from the alliance’s member companies are collaborating in the search for water solutions.

Whether the effort is enough depends on how you value water, and there is no common yardstick.

“Water is complicated because water is so personal,” Kim Sturgess, CEO and founder of Alberta WaterSMART, a not-for-profit committed to improving the management of Alberta’s water resources.

“It means something different to every single person. For example, if you are a farmer in the south, it’s your livelihood. If you are a water user in oil sands in the north, it’s a fundamental input to your production.”

In Alberta, the discussion is further complicated by the uniqueness of the Athabasca River — the large water way that originates in the Columbia Glacier in Jasper National Park, discharges into the Mackenzie River system and eventually reaches the Arctic Ocean — while collecting bitumen from the oil sands that seeps naturally from its banks as well as saline ground water.

The river is large, but its flow shrinks in the winter.

There is a lot of finger pointing about whether the oil sands industry is contaminating it and whether its withdrawals will be unsustainable as the industry grows.

Ms. Sturgess said its natural state is unknown because there was no monitoring before production started.

With the provincial and federal governments joining forces last year to monitor the environmental impacts of oil sands development, she hopes there will be a baseline of commonly-accepted data from which to measure future changes.

“It’s hard to gauge impacts when you don’t know where you started,” she said.

“We need a set of information that everyone agrees on and then the public, research organizations, oil sands companies, regulators, are all working from that set, so that we are not arguing about how the science was done, we are having a good debate about the results. Without that good solid base, it gets back to emotions immediately. And once water becomes emotional, it’s very difficult to have a conversation.”

Ms. Sturgess, who consults to oil sands companies, said they are highly motivated to improve water use.

Part of it is about improving environmental performance, but part has to do with improving their overall operations.

“A huge improvement over the last ten years is the realization that it’s not just about managing the oil, it’s about managing the system and water is such a big part of the system,” she said.

Contributing to the business case is acceptance of a new way of valuing water that looks at the risk of not having it, rather than at water as a free and accessible resource.

It’s a view espoused by an increasing number organizations globally, including companies like Paris-based Veolia Water, the world’s largest supplier of water services and a big provider of water treatment equipment to oil sands operators.

“Our contention is that even if water doesn’t cost very much, it has a much higher value to the organization in terms of risk management,” Ed Pinero, Veolia’s Chicago-based chief sustainability officer for North America, who is assisting oil sands companies develop water valuation tools.

“And when you do it that way, you realize that water is a lot more important in terms of the value to your organization than simply what you pay for it, assuming that you pay anything for it.”

Water risks include not having access to water, for example because water sources are not available or are restricted by governments; having to improve water treatment or more stringent discharge limits; facing higher insurance costs for being a high water user in a water strapped area.

There are also risks related to water-related incidents, although Mr. Pinero said those tend to be better appreciated and quantified by oil sands companies.

Water worries are growing around the world, particularly in industries like oil and gas and mining where operators are bound to their geographic locations because that’s where the resources are, Mr. Pinero said.

“I think we are coming up very soon to a global discussion on the importance of water,” he said.

“If you think about how much discussion goes on a global scale about climate change and policy and governance and technology, we don’t have that level of discussion on water yet, but I think it’s just as important to society as the climate issue.”

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.